The iPod
Effect
Now you see it, now you don't. All sub-visible phenomena have this
mysterious quality to them. Sub-visible not just because Apple's
hot new sensation, the handy little iPod, makes its physical presence
felt so discreetly. But also because it's an audio wonder more than
anything else. Expect more and more handheld gizmos to turn musical.

It
doesn't take a cigarette-smoking cookie-baking oracle to spot the
future trends that lie hidden, barely so, in the matrix of numbers
that make up the BT 500. Anyone can do so; all it takes is the ability
to stare fixedly and fixatedly (it is ok to blink) at the listing
and think of middle-school lessons about Brownian motion. As if
by magic, the numbers rearrange themselves into patterns of the
less-than-perfect past (in tense corporates, the past is always
thus), the emerging present, and the promised future. It's that
simple, really.

The BT 500's faculty for presage doesn't take
away anything from its primary function: to capture a company's
ability to create value through the simple expedient of measuring
its market capitalisation over a sufficiently long and reasonably
recent period of time. The first motivated the BT 500's decision,
in 1997, to rank companies on the basis of average and not point-in-time
market capitalisation just as the second did, in 2002, its decision
to base the average not on data available for the completed financial
year (April 1 of 2001 to March 31 of 2002 in this case) but on that
for the recently ended half-year (April 1 of 2002 to September 30
of 2002).

Other corporate listings abound. There are
some that include closely held and unlisted companies, but the data
is usually of a vintage (at least an year-and-a-half old) that renders
it irrelevant. There are others that rank companies on the basis
of sales (like the Fortune 500 does), although it has consistently
been this magazine's position that only a market value based listing
can look at the future.

Only companies with a market capitalisation
over Rs 1,000 crore have been considered
* Market capitalisation/sales

And there are still others that marry the unrelated
measures of sales and assets, ignoring caveats related to asset
utilisation (to offer one instance, the average of sales and assets
for Essar Oil, at around Rs 4,760 crore is higher than that of Ranbaxy,
at Rs 3,690 crore; the BT 500 ranks the first at 172 and the second
at 9, which are numbers most people would be comfortable with).

Critics of the BT 500 have long pointed to
the imperfections of the Indian stockmarket as reason enough to
distrust measures based on stock price. They're right, of course,
but only to an extent. Stock prices can be rigged, sales can be
MIS-accounted, and the world at large, fooled, but only temporarily.
Which is why every BT 500 listing carries information on the previous
year. As a dynamic representation of the market's assessment of
a company's fortunes over two years, the BT 500 is the closest you
can get to a sure thing. And when seen as a saga spread over 13
years-yes, this is the 13th year of the listing-the BT 500 is nothing
short of the most accurate chronicle of its kind on India Inc's
post-liberalisation fortunes and, more pertinently, the perfect
trend-spotter, at least as far as the next big thing is concerned.

THE TOP 10 GAINERS:

By absolute market capitalisation

RANK

COMPANY

INCREASE

1

Reliance

20,535

6

Bharti
Tele-Ventures

19,317

3

Infosys

15,487

4

Wipro

14,467

8

ICICI
Bank

10,493

10

Tata
Motors

8,180

14

Reliance
Energy

7,726

7

ITC

6,768

13

Maruti

6,495

12

Tata
Steel

6,281

Figures are absolute increase
in market capitalisation in Rs crore. Companies that listed
on the stock exchanges in the past 12 months have not
been considered

By percentage market
capitalization

RANK

COMPANY

INCREASE

63

HCL
Infosystems

3.5

80

Jubilant
Organosys

3.1

38

Sterlite
Industries (India)

2.6

6

Bharti
Tele-Ventures

2.3

98

Sterling
Biotech

2.3

64

Matrix
Laboratories

2.2

90

Micro
Inks

2.2

91

Adani
Exports

2.1

14

Reliance
Energy

2.0

31

Mahindra
& Mahindra

1.8

Figures are percentage increase
in market capitalisation. Only companies with a market
capitalisation over Rs 1,000 crore have been considered

Manufacturing is back

Tata Motors' Ratan Tata: The company
is on a roll...again

THE
PERSONAL TRANSPORTATION TREND:By
2005, India should be a 1-million-units-a-year car market. Vroom!

Macro-economic numbers have suggested this for
some time; in the April-June quarter of 2004 for instance, the manufacturing
sector grew by 8.2 per cent as compared to the 6.5 per cent by which
it grew in the same period last year. And it has been suggested
by scattered news reports on the competitiveness and the growing
global presence of Indian industry; Bharat Forge, for instance,
is the second largest forgings manufacturer in the world and Hindalco,
amongst the lowest cost producers of aluminium. Now, further evidence
comes by way of the BT 500. For starters, a car maker-the manufacture
of automobiles is considered the most complex manufacturing industry-re-enters
the top 10 of the BT 500 (Tata Motors, #10) after four years. And
another is knocking on the doors of that elite listing (Maruti Udyog,
#13 this year, #18 last year). It isn't just these companies; in
a period (April to September 2004) when the aggregate average market
capitalisation of the BT 50 touched Rs 5,77,571.3 crore, an increase
of 74 per cent over the corresponding period in 2003, the share
of the automotive sector increased from 8.97 per cent to 10.08 per
cent (see BT 500 In Numbers, page 76). In effect, the market sees
good times ahead for this sector.

Telecommunications, even cars are the new
fast moving consumer goods

Ranbaxy's
Brian Tempest: A top 10 regular

THE
LIFESCIENCES TREND:Pharmaceuticals,
healthcare and biotech rule. All told, the BT 500 boasts 50
companies from these sectors

The market has great hopes of the telecommunications
sector. India's two largest telcos, Reliance Industries (Reliance
Infocomm is a subsidiary) and Bharti Tele-Ventures have each seen
their market value increase by some Rs 20,000 crore in the first
half of this year (April to September) as compared to the same period
last year. And even Videsh Sanchar Nigam Limited, once a government-owned
international long-distance telephony monopoly that is now part
of the Tata Group, and Tata Teleservices (Maharashtra) have not
fared too badly. Some analysts believe it is the monthly burn on
telephone bills (most subscribers of mobile telephony companies
such as Bharti use pre-paid cards, and spend a few hundred rupees
on this every month) that has motivated consumers to move from high-priced
fast moving consumer goods to low-priced alternatives, a phenomenon
they term downtrading.

Nestle's
Carlo Donati: He's headed for Paris, but even the conservative
and stable nestle India has lost some gound in the BT 500

THE
FMCG TREND:If there
is one sector that has lost ground in the BT 500, it is Fast
Moving Consumer Goods. Every company in this sector has slipped

The performance of the FMCG companies in the
BT 500 seems to bear this out. Without an exception, all have slipped
in the rankings (see The FMCG Trend) with some, like #5 Hindustan
Lever Limited even registering a fall in market capitalisation.
Since last year, the share of FMCG companies in the BT 50 has declined
from 14.19 per cent to 5.85 per cent, one indication that the market
does not expect things to get better for the sector anytime soon.
It isn't just the telecommunications boom that is hurting FMCGs;
it is the EMI (equated monthly instalment) culture that makes it
possible for consumers to pay in affordable parts for everything
from cars to holidays to salsa classes. In early 2004, India's largest
carmaker Maruti Udyog launched what it chose to call the "2599
scheme" for its entry-level Maruti 800 (an EMI of Rs 2,599,
over seven years, and a down payment of between Rs 40,000 and Rs
50,000). Today, one out of every three Maruti 800s it sells are
under this scheme or similar ones. Last word: As the graphic on
page 76 shows, the share of FMCG companies in the top 50 has dropped
from 14.19 per cent last year to 5.61 per cent this year.

Tata Power's Firdose
Vandrevala: On an upward trajactory

Bharati's Sunil Mittal:
Up, up and away

THE
POWER TREND:Despite
the government's apathy to power sector reforms, business is
booming

THE
TELECOM TREND:The story
of the year. With the number of mobile telephony subscribers
set to double again this year, things couldn't be any better

Retail finance, organised retail, retail
everything

This year, Indian banks and financial services
companies will lend in excess of Rs 65,000 crore to consumers wishing
to buy a home. They have issued (and service) over 10 million credit
cards. And they-at least, some of them-are at the vanguard of a
retail banking and financial services revolution built around reach,
the use of technology, and the promise of low-cost service. Today,
most of India's 90-odd public sector banks have jumped on to the
retail bandwagon, but it takes more to succeed than just the desire
to go retail. Marketing aggressiveness, technological felicity,
and the ability to cross-sell offerings are the key ingredients
of a successful recipe, and companies such as ICICI Bank, HDFC,
and HDFC Bank have built their growth strategies around the three.
ICICI Bank and HDFC Bank, for instance, can get a new branch up
and running in less than a week.

It isn't just retail finance and retail banking
that have caught the customer's fancy, but organised retail too.
The story of the year, in this sector, has to be Pantaloon India
whose iconoclastic CEO Kishore Biyani (he believes organised retail
has a great future in India because it is a nation of shopkeepers)
seems to have discovered the perfect large-format retail formula,
as exemplified by the success of his company's Big Bazaar outlets.
And heavyweights such as Reliance, Godrej and the Hero Group are
now jumping into the fray.

THE
RETAIL TREND:Organised
retail is big business and could well be the next big thing.
PS: Everyone wants a piece of the pie

Anything can be the next big thing

Circa October 2004, the most promising stock
picks from the BT 50 would include (apart from usual suspects software,
lifesciences, banking and financial services, and automotive) cement,
steel, non-ferrous metals, even power. At one level it is possible
to dismiss this as a result of a few companies striving to make
themselves globally competitive. At another, it presages a move
to a more balanced BT 50. The share of the top six sectors (think
financial services, automotive, pharmaceuticals, software, fast
moving consumer goods, and Reliance, which is big enough to be considered
a sector all by itself) in the BT 50 last year was 73.84 per cent.
This year, it is 71.47 per cent. And remember, the BT 50 is worth
some Rs 2,47,000 crore more this year than it was in 2003.

Infosys's Nandan Nilekani: Will
grow by 45, 46, er 47-48 per cent

THE
SOFTWARE TREND:Still
the most promising sector in the BT 500, software is now starting
to make an impact in terms of sales too with three $1 billion-plus
firms in the top 10

The software and pharma sectors are living
up to their promise

There's a long boring way of saying this, and
there's a short snappy way of doing so. Here goes an attempt at
the second: in 1992, the pharmaceutical sector accounted for 4.42
per cent of the BT 50 by market value and 3.53 per cent of it by
sales. In 2003, the corresponding proportions were 10.41 per cent
and 4.26 per cent. And in 2004, 9.58 per cent and 5.8 per cent.
That means, some of the value the market saw hidden in this sector
(which would explain its high share of market value in 2003) is
beginning to be realised. The story of the software sector is similar
(see BT 500 In Numbers, page 76). Last year, it accounted for 5.56
per cent of the BT 50 by sales. This year it does 9.25 per cent.
Need one say more.